When Trump imposed tariffs on China in his first term as president, Apple began to move production of iPads and AirPods to Vietnam and iPhones to India. This won’t help now.
On April 3, U.S. President Donald Trump announced the introduction of duties on most countries. In particular, they amount to 46% for Vietnam and 26% for India. The New York Times calls it a direct threat to Apple’s production and supply chain. Sales of iPhones, iPads, and Apple Watches account for 3/4 of its nearly $400 billion in annual revenue. Apple’s operations are not exempt from the new duties, so it is likely that the burden will be passed on to the end consumer.
According to Morgan Stanley, duties on iPhones and other devices imported from China will increase Apple’s annual costs by $8.5 billion if there is no relief from the Trump administration. This will reduce the company’s profit next year by $0.52 per share, or about $7.85 billion. This means about a 7% decline in the company’s profit next year. After Trump’s announcement, Apple shares fell 5.7% in the secondary market.
After Trump’s inauguration, Tim Cook, Apple’s CEO, visited the White House and promised to invest hundreds of billions of dollars in the United States. In February, Apple announced a plan to invest $500 billion in the country, with much of this spending already planned. Under the previous Trump administration, Cook’s efforts to build a relationship with Trump helped Apple avoid tariffs on most of its products, including the iPhone and Apple Watch. In 2019, Trump visited Apple’s computer plant in Texas. Since then, Apple has not moved production of any major products to the United States, but has diversified outside of China.
In 2017, when Trump first came to power, Apple began installing iPhone assembly lines in India. It took the company five years to train workers and build a production infrastructure in the country. Now production is increasing — Apple hoped to produce in India about 25% of the iPhone.
The company has also started moving production of AirPods, iPads, and MacBooks to Vietnam. This country has been of interest to Apple and others since plants in China closed due to COVID-19. In 2023, 10% of the company’s top 200 suppliers were concentrated in Vietnam. Vietnam was an attractive location because of its proximity to China. India was attractive because Apple wanted to increase iPhone sales in a country that is the second-largest smartphone market in the world.
But Apple has had difficulties with production in the United States in the past. The plant in Texas that produced Macs had labor problems, forcing the company to shut down the assembly line. In addition, it was difficult to find suppliers who could make the necessary components, even things like custom screws. Tim Cook said that the United States does not have enough skilled workers to compete with China. At a conference in late 2017, he said that China is one of the few places where Apple can reliably find people who can operate the state-of-the-art machines that make its products.
«In the United States, you could have a meeting of engineers and I’m not sure you’d fill the room. In China, you can fill several soccer fields», — said Tim Cook.
Website MacRumors adds a list of new «tariffs» that will affect Apple’s supply. It’s not just India, China, and Vietnam:
- Vietnam — 46%
- Thailand — 36%
- China — 34%
- Taiwan — 32%
- India — 26%
- Japan — 24%
- Malaysia — 24%
- EU — 20%
So, the increase in the cost of Apple devices appears to be significant and inevitable. We should not expect that only American users will suffer. The company will almost certainly diversify its cost compensation across the globe to prevent a single large price increase in certain markets. Also, don’t forget that the situation affects other electronics manufacturers in one way or another.
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